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online.wsj.com - 12/23/2008
Ben Bernanke Is the Best Stimulus Right Now
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ROBERT E. LUCAS JR. The Federal Reserve's lowering of interest rates last Tuesday was welcome, but it was also received with skepticism. Once the federal-funds rate is reduced to zero, or near zero, doesn't this mean that monetary policy has gone as far as it can go? This widely held view was ...
traderdaily.com - 12/18/2008
Betting Big on Bernanke
— traderdaily.com — Investors are trying to have their cake and eat it, too. No sooner had the U.S. Federal... Reserve cut rates to practically zero than both stocks and long-dated Treasuries rallied. Short term, this could make sense, particularly if the Fed follows ... (more) Betting Big on Bernanke

Comments vote down Emini Addict found this 12/18/2008found this
economistsview.typepad.com - 12/23/2008
Lucas: Monetary Policy Can Still be Effective
— economistsview.typepad.com — Robert Lucas says monetary policy can still effectively stimulate new spending even though the target interest rate... is already at or near zero, and that monetary policy is preferable to fiscal policy: Bernanke Is the Best Stimulus, by Robert E. ... (more) Lucas: Monetary Policy Can Still be Effective

Comments vote down Abnormal Returns found this 12/23/2008found this
Bernanke & Co. is Locked and Loaded
kudlowsmoneypolitics.blogspot.com - 12/17/2008
Bernanke & Co. is Locked and Loaded
— kudlowsmoneypolitics.blogspot.com — In a monetary version of shock-and-awe, the Federal Reserve unleashed a massive easing move with its FOMC... policy announcement Tuesday -- one that represents a sea change in central-bank operations. For starters, Bernanke & Co. established a new ... (more) Bernanke & Co. is Locked and Loaded

Comments vote down Club for Growth found this 12/17/2008found this

Blog Reactions

Economist's View:  Lucas: Monetary Policy Can Still be Effective

Greg Mankiw's Blog:  Lucas on the Economy

Abnormal Returns:  Tuesday links: demand destruction

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Blog Reactions

Lucas: Monetary Policy Can Still be Effective
Economist's View — ... Bernanke Is the Best Stimulus, by Robert E. Lucas Jr., Commentary, WSJ: The Federal Reserve's lowering of interest rates last Tuesday was ... received with skepticism. Once the federal-funds rate is reduced to zero, or near zero, doesn't this mean that monetary policy has gone as far as it can go? This widely held view was appealed to in the 1930s to rationalize the Fed's passive role as the U.S. economy slid into deep depression. ...

Lucas on the Economy
Greg Mankiw's Blog — Nobel Laureate Robert Lucas says that monetary policy is still the first line of defense.

Tuesday links: demand destruction
Abnormal Returns — ... “The Fed is lending on terms that private banks are not willing to offer. “  (WSJ.com also ...

Would you believe that $600 billion dollars has been put into the US economy?
BloggingStocks — ... Ben Bernake has initiated the biggest cash infusion in Federal Reserve history -- a stunning $600 billion dollars that has been put into the US economy. ...

More niggling on fiscal stimulus
Marginal Revolution — ... Those looking for other policy alternatives might consider Robert Lucas's recent suggestions for monetary policy or cuts in the payroll tax, although I am myself not quite (yet?) on either bandwagon (though I think they are better plans than massive fiscal stimulus). ...

What instead?
Marginal Revolution — ... posts, I recommend: 1. A certain amount of "defensive" fiscal policy aimed at keeping state and local government budgets roughly constant.  This will limit downside but it won't much "stimulate," for reasons which should be apparent in the graph shown by Matt.  In various emergencies it is inefficient that state and local governments are not allowed to run deficits but implicitly the Feds can do it for them. 2. Unorthodox monetary policy, as advocated by Robert Lucas and also, earlier, Keynes.  You can stimulate AD at ...

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